PetroVietnam suspends Venezuela project

PetroVietnam has decided to temporarily halt its involvement in a US$1.8 billion oil exploration project in Venezuela.

Vietnam Investment Review quoted Phung Dinh Thuc, chairman of the state-run PetroVietnam, as saying the Block Junin 2 project in Venezuela was experiencing difficulties, due to remarkable currency fluctuation in the host country, particularly from the galloping inflation rate which was causing losses to the country’s currency value.

“I am sure that no investors are able to bear the current exchange rate between Venezuela’s [currency] and the US dollar. That’s why PetroVietnam has decided to halt the project, and wait for an improved currency situation in the future,” Thuc said.

Thuc added that Vietnam was not the only country involved in the project. “Many other countries and partners are doing the same, such as China, Russia and France,” he said.

Vietnam and Venezuela signed a contract for the establishment and management of the mixed company PetroMarareo S.A, to operate the Block Junin 2 project in Venezuela in 2010. Block Junin 2 and the Nhenhexky in Russia, are PetroVietnam’s two most important overseas projects to date.

The shareholders in the mixed company are PetroVietnam Exploration Production Corporation, a wholly-owned subsidiary of PetroVietnam (40%) and the Petroleos de Venezuela S.A. (60%).

The PetroMarareo S.A is to produce and upgrade heavy oil exploited from Block Junin 2, in an area of 247 square kilometers, containing about 36 billion barrels of oil.

PetroVietnam expects to exploit more than 1.4 billion barrels over 25 years. This capacity could be increased to roughly 2.5 billion barrels if the project is extended for a further 15 years. This project was estimated to require investment of more than US$1.8 billion.

To date, PetroVietnam has less than 30 overseas projects, mostly in Asia Pacific, the Middle East, northern Africa, Russia and Latin America.

In 2013, the group produced 16.7 million tonnes of crude oil, of which more than 1.5 million tonnes was from overseas projects.

Vietnam is the third-largest crude oil producer in Southeast Asia after Indonesia and Malaysia, with a daily output averaging 350,000 barrels.

Venezuela is the biggest oil producer in Latin American and the fifth largest oil exporter to the US. The country is producing around 3.3 million barrels of oil per day, 2.7 million of which are exported.

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